PM talks customs union, regional issues and hockey

Russian Prime Minister Vladimir Putin sums up the results of the meeting with his counterparts from Belarus and Kazakhstan in an interview with Russian MIR TV channel in St. Petersburg.

MIR: Mr. Putin, thank you so much for, after a long and difficult day, agreeing to meet with us and answer our questions. As far as I know, just recently in the press you announced that after long talks, Russia, Belarus and Kazakhstan have not been able to co-ordinate their positions on the Customs Union. What particular issues did you disagree on?

Vladimir Putin: We have not been able as yet. That’s the first thing. Secondly, this is not regarding the Customs Union, but certain aspects of our economic co-operation. They are quite specific, and solving these issues has to do with economic situations in specific areas. What are we talking about here? For example, in one of these countries, Kazakhstan, there is a regulation allowing individuals to bring in to the country up to two tonnes of international goods under a low tax rate – 0.6 euros. Two tons is a lot. Any individual. No limit to how many times he brings these volumes into the country. This is quite significant for our light industry, because a large part of these goods come from China of course.

MIR: And for Belarus?

VP: And for Belarus. You are absolutely right. Or, for example, Russia plans to develop its car industry – support the already existing industries and develop new ones. When we finalized these plans, we had certain agreements with the investors, who came to our customs territory, started industries here, creating jobs and developing new technologies. But we promised them a certain level of customs protection from the import of new and, especially, previously owned cars. It is especially important in this time of crisis, because if we take a step back now, we will risk the future of some of our industries. That’s the second thing. Further – the future of economic zones, especially the ones with tax benefits. It is one thing when we import goods or components into these zones, especially if they are further developed here, with added value of 50 per cent or more. And it is another thing, when we just do minimal assembling, without any added value. It’s one thing when, after making the product, we take it to a customs zone with certain taxes on either components or final products. And quite another if we don’t charge any customs tax. This, in essence, jeopardizes different sectors of Russia’s industry.

If we allow the importing of certain goods into our customs territory without any customs tax, this would have long-term effects. Some countries suggest bringing the tax down to zero for all aviation equipment. We cannot agree to that, because in this case all our aviation industries, which we have just begun to restructure and hope to see them thrive and compete not only on our market, but also on the world market, will not be unable to succeed. That is if we trip them up now, at the very beginning.

And for Belarus, for example, it is very important to settle the issue of the export customs taxes on a number of things, first of all – oil, oil products and some other goods. This is all very significant. And I have to tell you that the history of all integrated unions in the world is very complicated, and no one has been able to easily settle these issues. Everybody had to go through a lot of difficulties on the way to cooperation. But we know where we want to go and how to find mutually acceptable solutions, so I think we will make it.

MIR: Correct me if I am wrong, it appears that the Customs Union will not start to fully function on July 1st, as was planned before?

VP: You are right – it will not start to function fully.

MIR: Considering the results of today’s talks, how relevant are the issues that Belarus raised earlier – concerning discounts on Russian energy products?

VP: Belarus did not talk about new prices on energy products. We have two problems. The first one is export customs tax on crude oil, but considering our special relations with Belarus, we would like to support the Belarusian people and their economy. Therefore in order to supply the need inside the country we gave them a discount, and delivered 6.3 tonnes of crude oil to Belarus to supply the internal demand. No tax. But our colleagues would like us to expand this gesture. But that is a different story.

MIR: As far as I understand, Belarus would like discount prices on gas as well, similar to the deal between Russia and Ukraine.

VP: Belarus gets a discount on gas anyway, they get a better discount than Ukraine, even after the agreements on Sevastopol and the Black Sea Fleet. Today after we reached these agreements with Ukraine, it is 30 per cent off, which is $234 per one thousand cubic meters. Belarus pays $180 for a thousand cubic meters. These are the lowest prices in the CIS. No one pays less. Ukraine, as you can see, pays more even after the discount. The problem is that a couple of years ago we agreed with our Belarusian friends that we would gradually switch to the European price formula in our gas trade with Belarus. But in order to cushion the blow and make it easier on Belarus’ economy, we agreed on the discount.

During the first year the discount would mean 75 per cent of the projected European price is paid. Then 80, I think, then 90, and finally 100. In 2011 we are supposed to start charging the full price. Our Belarusian friends asked us to keep the 2008 prices in 2009. And we agreed. They promised they would make two steps up afterwards. I told them then that it would be hard to do, but they insisted and we accommodated their request. Now they are paying us unilaterally the same as what they paid in 2008. So they don’t pay what they ought to. They owe us a certain amount. But that is a business problem, and I think it will be solved at that level.

MIR: The creation of the Customs Union is deemed as the first stage towards creating a Unified Economic Space. The date for it is scheduled – it was announced earlier – the Unified Economic Space should come into effect from 1 January 2021. Given today’s talks, can this be moved to another future date?

VP: On the contrary, today I suggested we should step up solving the issues related to establishing the Unified Economic Space. So as to make it work, we need two packages of documents. One of them should be ready by July next year. The other should be ready by the end of 2011. I proposed that before the end of 2010 we prepare the whole package. What’s more, if at all possible, we could sign and ratify it, as it would have a delayed date before becoming effective – agreed, to be 1 July 2012. Or perhaps even earlier, should we have everything signed and ratified. We are ready to do that earlier. I proceed from the idea that in this case we could take more steps towards each other and resolve issues of duties and tariffs and so forth. It would be easier to do so within the common agreements on macroeconomic policy and other problems that are even more fundamental than customs regulation issues. If we talked about more fundamental problems, we would be able to co-ordinate the customs issues more easily.

MIR: Vladimir Vladimirovich, this year Russia is presiding over the CIS and one can’t help but note the positive tendencies visible in the integration processes within the Commonwealth. Russian-Ukrainian relations are obviously a striking example of that. How do you, as prime minister of a country that presides over the CIS, view the future of this organization?

VP: We are well aware of how much criticism there has been about the CIS. Let me assure you though that unless there had been the CIS, we could not have been co-ordinated in many issues, either economic or social. We don’t even notice they have been regulated, because as we are living we believe this is the way it should be. If there had been no CIS, everything would have been different, worse. Even Georgia, when it proclaimed it was withdrawing from the CIS, remained in 75 agreements. It is because they are vitally important for that country. We realize this and, even more, we hail this. So, I believe that such a forum for us to co-ordinate our positions on economic, political and humanitarian issues is necessary and will be in demand.

MIR: You mentioned Georgia. Recently you frequently met with representatives from the Georgian opposition, among them Nino Burdzanadze and Zurab Nogaideli. Do you believe a kind of thaw could follow in relations between Russia and Georgia soon?

VP: First of all, we consider the Georgian people friendly to Russia and the Russian people. We have centuries of a special relationship between us. It’s a people of the Orthodox faith, close to us in spirit and history. What has transpired in recent years is a result, to put it mildly, of an erroneous, if not criminal, policy, of the current Georgian leadership. We are in no way going to meddle with the internal political affairs in Georgia. The meetings with representatives from the current Georgian opposition do not mean we want to interfere in Georgia’s internal affairs, but that the Georgian public is well aware – to our joy – that it’s necessary to build at least normal interstate relations. We do want that and we are building a dialogue with those people who were pretty hard to talk to just recently. You mentioned Nino Burdzanadze. Politically, she is still rather close to the current president. And the fact that she has established a dialogue with various political forces in Georgia is a good prerequisite for normal interstate relations to be built with Georgia.

MIR: Vladimir Vladimirovich, many have noticed that the leaders of the Interim Government of Kyrgyzstan did not attend the sessions. How do you assess the situation in that country?

VP: It’s complex and controversial. It is not yet possible to present any definite assessment so far, because we do not yet understand its internal processes. However, we would like this period of uncertainty to end soon, because our feelings toward the Kyrgyz people are special. As you know, we decided to lend humanitarian aid to Kyrgyzstan: in cash, oil products and grain. At the moment are considering a prolongation and expansion of aid. And, we are certainly interested in the reaffirmation of the legitimacy of the current authorities by procedures generally recognized in the world – which are elections. I know that the current leadership of Kyrgyzstan is preparing the elections. There are procedural and protocol problems though, and only this can explain the absence of the top officials from this country at today’s sessions. At the same time technically, there is absolute clarity about what has been going on in terms of integration, and we have been informing the Kyrgyz side about that in full.

MIR: You have had bilateral talks with the prime ministers of Moldova and Tajikistan today. What’s your take on the results?

VP: We have discussed particular issues of a much simpler technical character, still very important for every person: about healthcare and combating infectious diseases. We discussed ways out of this dangerous situation, as well as issues of economic assistance, of co-operation in energy, healthcare and many other items, in many of which we have co-ordinated our positions. As for Moldova, we are aware of its political situation not being determined yet. It may be not as acute as in Kyrgyzstan, but we have seen it be nearly the same as in Kyrgyzstan. We would like to have not just calm borders around Russia, but also a positive political and economic situation in neighboring countries, since they all have an impact on us. Thus we are going to do our best to help our neighbors, including Moldova.

MIR: At the EurAsEC session today, Armenian Prime Minister Tigran Sargsyan put forward an initiative from Armenia on building a railway that would connect Russia and Iran. Will Russia take part in the project?

VP: It is not meant to connect Russia and Iran, but to let Armenia have access to the Iranian border through a railway. From the economic point of view it is not an easy project. Still, Armenia has submitted its application for loans from our common fund created within the EurAsEC – for more than one billion dollars. The application is being reviewed.

MIR: Vladimir Vladimirovich, did you watch the ice-hockey match between Russia and Canada at the World Championship? What do you think of our national team’s play?

VP: I watched the game. I think our team performed very well. Our players played with enthusiasm, with great professionalism, toughly and with a good result, which made us happy. I want to say a big thank-you to them.